Sudan deal opens door to oil

Jan 15, 2004 01:00 AM

by Jeremy Scott-Joynt

In far too many African countries, oil -- or another natural resource -- has been what prolongs a conflict. In Sudan,
the main factions in a two-decade-long civil war have reversed the trend.
The first thing to come out of peace talks in the Kenyan town of Naivasha, intended to put flesh on the bones of an
agreement signed last year under international encouragement, is a deal on sharing the revenue from Sudan's oil
reserves.
The deal leaves the detail of power-sharing between the largely Christian south - represented by the Sudan People's
Liberation Army (SPLA) -- and the Muslim government in the north, not to mention the problem of three hotly disputed
territories, still to be thrashed out. But it splits revenues 50:50, after a 2 % cut for the oil-producing districts
themselves. It also draws up a structure for the country's central bank, allowing interest-free Islamic financial
structures and Western-style banking to sit side by side in the same institution.

Growing production
Aid agencies, pressure groups, governments and economists agree that the deal, as it stands, is good news. It offers
the chance of solid funding for the massive development needs of all Sudanese.
The government's oil ministry hopes it will allow production to grow from the current 250,000 bpd -- bringing in
about $ 2 bn a year -- to 500,000 barrels by 2005.

Why US wants Sudan peace
This, cautions the Economist Intelligence Unit's Philip McCrum, is probably optimistic.
"We think 400,000 barrels by 2007 is more likely, and increased production may not have a hugely significant effect
on revenues, since in the short term we see oil prices dropping," he says.
But building infrastructure to distribute and transport the oil will make supplies easier to obtain, cheaper and more
reliable. And that will encourage investment.

At first, it won't be the big Western oil names that are making the running. Recent years have seen European and
American names pull out under pressure from human rights groups, who have made public the displacements and other
more violent abuses perpetrated by government forces to clear people from oil-rich territory.
China's CNPC, India's ONGC and Malaysia's Petronas are now the biggest players, pumping billions into exploration and
exploitation. That is not to say that big firms such as Shell, Exxon or Total may not be back. For the Sudanese
authorities south and north, their technological advantage would be useful, Mr McCrum points out -- and the symbolism
of having them back would indicate a return to normality for the country.

Still, there are roadblocks ahead. The peace plan calls for six years of autonomy for the south, before a referendum
on possible secession. Putting aside the referendum, the power-sharing will be problematic enough, observerssay, with
former enemies working cheek by jowl.
Marina Peter, of Sudan Focus Point Europe, is in no doubt that getting the deal is a "big step forward" -- but the
devil, she warns, will be in the detail. Key sticking points in the wealth-sharing agreement are glossed over,
including the fact that where the north sees government land, the south often assigns rights to communities. That
could affect compensation for the displacement that will still go on.
"It's a crucial human rights issue," Ms Peter says.

On top of that, one issue that dogs resources in poorer countries is barely tackled: that of transparency in
revenues, to stop much-needed money leaking away into private pockets. Of the four countries that are observers to
the peace process, two -- the UK and Norway -- are strong supporters of initiatives encouraging natural resource
companies to "publish what they pay" to governments in licences and commissions.
Wealth sharing is fantastic," says Gilly Usborne of Save the Children. "But how open will either side be about what
happens to the money?" And the EIU's Philip McCrum is hardly sanguine either.
"The companies that are biggest in Sudan right now are state-owned - and the states in question have not, I believe,
signed up to any transparency initiatives," he says.

One further issue is particularly worrying to observers. Most of the attention on Sudan focuses on the
north-versus-south problems. But in Darfur in the west of the country, there is another ongoing insurrection --
although the forces opposing the government are Muslim, rather than Christian.
The talks in Naivasha have nothing to say about the Darfur situation, and there are fears that the conflict there
could be inflamed if local people feel left out of the wealth-sharing deal. There is even the concern that the rebels
in Darfur could ally with other groups in the Nuba mountains and along the Blue Nile who have suffered at the
governments' hands, intensifying conflict across the country. To their credit, the countries with an interest in the
talks are pushing the government to face up to the trouble in Darfur.

"We reiterate our deep concern at the crisis resulting from the conflict in Darfur," said UK Foreign Secretary Jack
Straw.
The pressure, people familiar with the peace talks say, needs to stay on the government and the south, to make sure
that a deal to share the spoils does not make life worse elsewhere.